Return On Capital Employed Overview: Flexion Therapeutics

In Q1, Flexion Therapeutics FLXN posted sales of $24.59 million. Earnings were up 61.83%, but Flexion Therapeutics still reported an overall loss of $23.14 million. In Q4, Flexion Therapeutics brought in $26.31 million in sales but lost $14.30 million in earnings.

What Is ROCE?

Return on Capital Employed is a measure of yearly pre-tax profit relative to capital employed by a business. Changes in earnings and sales indicate shifts in a company's ROCE. A higher ROCE is generally representative of successful growth of a company and is a sign of higher earnings per share in the future. A low or negative ROCE suggests the opposite. In Q1, Flexion Therapeutics posted an ROCE of 0.6%.

Keep in mind, while ROCE is a good measure of a company's recent performance, it is not a highly reliable predictor of a company's earnings or sales in the near future.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

In Flexion Therapeutics's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q1 Earnings Insight

Flexion Therapeutics reported Q1 earnings per share at $-0.57/share, which did not meet analyst predictions of $-0.52/share.